Don Emmert/AFP/Getty Images

Stocks sink as virus cases spike

Associated Press Jun 11, 2020
Don Emmert/AFP/Getty Images

Stocks are falling sharply on Wall Street as coronavirus cases increase again, deflating recent optimism that the economy could recover quickly as lockdowns ease. The Dow fell more than 1,500 points and the S&P 500 is on track for its worst day in nearly three months. Many market watchers have been saying that a scorching comeback in the market since late March was overdone and didn’t reflect the dire state of the economy.

That echoes sentiment from the Federal Reserve which Wednesday said the road back to recovery would be long, dimming some of the optimism investors have had about a swift economic rebound. The central bank also said it doesn’t foresee a rate hike through 2022.

Coupled with the recent run-up in stock prices, that set the stage for the wave of selling Thursday, said Sal Bruno, chief investment officer at IndexIQ.

“It’s not surprising to see a bit of a sell-off, given the furious rally we’ve had coming out of the lows, despite the fact that the economy was not doing great,” Bruno said. “The fact that (the Fed) is talking about keeping interest rates this low through 2022 is a little eye-opening for a lot of folks.”

As of 2:30 p.m. the Dow was down 1,592 points, or 5.9%, to 25,388. The Nasdaq composite, which was coming off an all-time high, slid 4.47%. Small company stocks continued to bear the brunt of the selling. The Russell 2000 index was down 5.9%. European and Asian markets also fell.

Nearly all of the companies in the S&P 500 were down. Technology, financial, industrial and health care stocks accounted for much of the market’s broad slide. Energy stocks were the biggest losers as crude oil prices fell sharply. Bond yields fell and the price of gold surged as worried investors shifted money into the traditional safe-haven assets. Delta Air Lines, Boeing and MGM Resorts International were among the biggest decliners in the S&P 500. Each was down more than 11%.

Emergency rescue efforts by the Fed and Congress helped arrest the market’s staggering 34% skid in February and March. Since then, the market had been riding a wave of investor optimism that the economy will bounce back by the end of the year, if not sooner, as businesses reopen and people go back to work. But confidence in that scenario is waning as infections and fatalities continue to climb in the U.S. and elsewhere.

In the U.S., Texas and Florida were among the states reporting jumps in the number of coronavirus cases after precautions were relaxed last month. The total number of U.S. cases has now surpassed 2 million.

Still, investors are waiting for more data to see whether the spike in COVID-19 cases are a sign of a possible second wave of the infection, said Charlie Ripley, senior investment strategist for Allianz Investment Management.

He’s focusing on updates to job numbers and consumer spending to gauge how well the economy is recovering.

“We think the recovery is largely underway, but there is still some considerable uncertainty on the path we have ahead,” Ripley said. “If we see some more follow-on of people coming back to work and consumer sentiment picking up, that will be a positive sign for a faster recovery.”

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